Early History
During the early part of the 1960s, the government of South Korea initiated a new economic strategy requiring the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the strategy for decreasing the trade deficit of South Korea while strengthening local production. This was a strategy that had already been utilized successfully y both Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo had a key part in this effort to improve the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these businesses that benefited in the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the large labor force of the country, its primary asset. By focusing on labour-intensive businesses, like clothing and textile, the company generated high earnings. The factory of the corporation in Pusan produced 3.6 million shirts each month. The corporation also made simple manufacturing equipment, which were labour intensive as well. In this time, the company Daewoo helped to boost the level of South Korea's exports, that were growing almost 40 percent per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of the country's economic recovery lasted from 1973 to the year 1981. This took place at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously making components that had to be imported previously. Local components production helped to make possible a national defense industry and strengthen domestic businesses.